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May 15, 2009

Trial Lawyers Ruffled By Chrysler Bankruptcy Plan

Trial lawyers will head to Capitol Hill on Monday to corner lawmakers about an issue they say has been overlooked in Chrysler’s bankruptcy proceedings: tort immunity.

Larry Coben, a Scottsdale, Ariz., attorney involved in the New York case, said the fast-approaching resolution would effectively divide Chrysler owners into three classes. Those who buy Chrysler automobiles after the company reorganizes and launches a new alliance with Fiat will retain traditional rights to sue for injuries caused by vehicle defects, he said.

But buyers of Chryslers on the market before that new company emerges will be barred from bringing a claim for car-defect injuries against the resulting Chrysler-Fiat manufacturer, Coben said. And at least 300 litigants with pending claims against Chrysler will likely be forced to scramble with other unsecured creditors for a share of whatever assets remain after bankruptcy, he said.

“It’s tort reform by the Treasury and the bankruptcy court,” Coben said.

California's Trial Lawyer Leader weighs in … after the jump.

The new company will honor all existing warranties, which puts Chrysler owners in an odd position, said Christine Spagnoli, president of the Consumer Attorneys of California. If a warranty covered part fails on your car, Chrysler will repair or replace it. If the part fails and your car rolls as a result, she said, you’re out of luck if you want to sue for related injuries.

"This is an attempt to escape liability for products that are still on the market," Spagnoli said.

The automaker filed for bankruptcy on April 30 with the hope that it would re-emerge bolstered under the combined ownership of the United Autoworkers, Fiat and the federal government. Spagnoli and Coben said U.S. Treasury officials have been so focused on reviving the giant company as quickly as possible that no one is scrutinizing liability issues.

“There’s nobody listening,” Coben said. “There’s nobody to talk to.”

Chrysler and Treasury representatives could not be reached late Friday.